When it comes to recovery, the short haul market will be first and there are some positive signs, many engines re-entering service in North America, Europe and Asia. However, despite increased flight volumes and resultant higher engine utilisation, load factors remain low. Border restrictions persist across all regions and passenger confidence to travel continues to challenge.
Using Values from IBA.iQ, we can show that mature engines will see the most extreme movements, base models of the CFM56-7B26 and 5B experiencing the highest swings primarily due to the host aircraft types having reached the end of their production cycle. Furthermore, these engines are now subject to tech insertions and performance improvement programmes and there's greater risk attaching to the more mature examples.
Airlines are pursuing fleet consolidation strategies to match market demand which, in time, could produce more parting out activity and retirements. In turn, we are starting to see an oversupply of engines and their spare parts in the market because pre-Covid, high demand had fallen away.
New generation narrowbody engines have shown resilience throughout the pandemic, playing a vital role transporting medical equipment and repatriating passengers. IBA.iQ shows a softening of values but we anticipate they'll recover. There's a starker outlook for the 737 MAX but we're confident it will come into service and its values will recover.
IBA's Engine Market Update is designed specifically around the business needs of Investors, Lessors, Operators and Financiers looking to understand the performance of the Engine market and the flight path to recovery. This session provides valuable insight to help the aviation community identify market opportunities, structure deals and mitigate risk in the wake of COVID-19. IBA's Phil Seymour, President and Head of Advisory, David Archer, Senior Engine Analyst and Jamie Davey, Engine Analyst, share their insight on: Engine value resilience and the flight path to recovery Shop Visit Forecast modelling and the impact on the aftermarket, values and lease rates How have OEMs been supporting the industry Fleet trends of the most popular engine types during COVID-19 Engine performance - Value and Lease Rate update The slide deck is available to download here. If you have further questions please contact: David Archer